Topic: Uniform Transfers to Minors Act (UTMA)
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A customer with an individual retirement account (IRA) at our bank passed away. The IRA has three beneficiaries, but one of them is only fifteen years old. Do we need to determine whether the minor has been appointed a guardian by will, court proceeding, or state law before making a lump sum distribution? Is it sufficient for the parent to sign all necessary IRA documents along with the minor before making the distribution?
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Yes, we believe it would be advisable to ask whether the minor has been appointed a guardian by will, court proceeding, or state law before making a lump sum distribution. Additionally, you should review the IRA’s governing instrument to ensure that the IRA owner did not appoint a custodian or guardian to manage the funds…
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For Illinois Uniform Transfers to Minors Act (UTMA) accounts, when a beneficiary turns 21, should we automatically transfer their funds to a new account, or should we wait until the beneficiary asks for the account funds to be transferred? Would it be a violation of the law to transfer the account funds when the beneficiary turns 18?
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We recommend notifying the beneficiaries of your UTMA accounts when they reach the age of majority, which may be 18 or 21 years of age depending on the type of UTMA account. If a beneficiary asks for the funds to be transferred to a new account, we recommend entering into a new account agreement with…
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A will provides that any share of the decedent’s estate distributable to a descendent who has not reached the age of 21 years may be distributed to a custodian for the descendant under any Uniform Transfers to Minors Act (UTMA). Can we open an Illinois UTMA account for a 19-year-old?
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Yes, we believe that you may open an Illinois UTMA account for a 19-year-old when the account has been created by a fiduciary acting under the authority of a will, since the Illinois UTMA provides that the custodianship will not terminate until the minor turns 21. Section 6 of the Illinois UTMA covers transfers made…
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Since you advised that a bank can open a certificate of deposit as a minor account solely in the name of the minor, what is the difference between doing that and opening an Illinois Uniform Transfer to Minors Act (UTMA) account?
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An Illinois UTMA account is a custodial account that allows funds to be set aside for a minor while restricting the minor’s use of the funds. Conversely, a minor account functions like an ordinary account opened for an adult, since the Illinois Banking Act provides that such accounts are binding on the minor as if…
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For property held in an Illinois Uniform Transfers to Minors Act (Illinois UTMA) account, how can we determine whether the presumed abandonment period under the Illinois Revised Uniform Unclaimed Property Act (Illinois RUUPA) will be measured from the date the minor turns eighteen or twenty-one?
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Whether the presumed abandonment period for an Illinois UTMA account will be measured from the date on which the minor turns eighteen or twenty-one depends on the way in which the account was funded. The Illinois RUUPA states that property held in an Illinois UTMA account is presumed abandoned three years after the date on…
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We offer two savings accounts that function in the same way; one is an Illinois Uniform Transfers to Minors Act (UTMA) account and the other is a minor savings account. If we mistakenly opened an Illinois UTMA account as a minor account, or vice versa, should we provide new disclosures before correcting the account names in our system? Also, would the escheatment rules for savings accounts apply, or the escheatment rules for UTMA accounts, when the title of the account doesn’t accurately describe the account — for example, if the title on an account reads “as Custodian Under ILUTMA,” but the ownership was incorrectly listed as “joint”?
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We recommend providing new account disclosures when changing an account name to add or remove a reference to the Illinois UTMA. A reference to the Illinois UTMA in an account name implies that the account is a custodial account subject to the Illinois UTMA’s requirements for custodians, rather than a savings account that is owned…
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We mistakenly opened a Uniform Transfers to Minors Act (UTMA) account for an employee and her minor child that should have been opened as a joint savings account. The employee is listed as the custodian on the account and all the deposits into the account have been made through payroll deductions with no indication that they are for UTMA purposes. Can we close the UTMA account and place the funds into a new joint savings account? The owners of the new account would be the employee and her minor child.
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Yes, we believe you may close the UTMA account and transfer the funds to a new account since they would not be considered “custodial property” under the UTMA. The UTMA provides that custodial property is created and transferred when money is paid to a financial institution for credit to “the transferor . . . followed…
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What is an appropriate age to allow a minor to open a demand deposit account as a single owner? The minor account holder would not be allowed a debit card or an overdraft agreement, and a POD beneficiary must be designated.
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The Illinois Banking Act permits banks to establish deposit accounts for minors with the same terms as if the minor is an adult. However, in our view, a minor should at least be old enough to physically sign the account agreement. If a minor is too young to sign such an agreement, there is no…